On January 1, 2014, Western Carolina Company granted Andy Eggers, an employee, an option to buy...

On January 1, 2014, Western Carolina Company granted Andy Eggers, an employee, an option to buy 2,000 shares of Western Carolina Co. stock for $25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $21,000. Eggers exercised his option on September 1, 2014, and sold his 2,000 shares on December 1, 2014. Quoted market prices of Western Carolina Co. stock during 2014 were

January 1 $25 per share
September 1 $30 per share
December 1 $34 per share

The service period is for three years beginning January 1, 2014. As a result of the option granted to Eggers, using the fair value method, Western Carolina should recognize compensation expense for 2014 on its books in the amount of

Expert Solution

Answer :-

CALCULATION OF COMPENSATION EXPENSES FOR THE YEAR ENDING 2014

Compensation Expenes	$ 21,000

Divide By	"/" By

Vesting Period (In Years )	3.00	Years

Compensation expenses of the year 2014 =	$ 7,000
($ 21,000 / 3 Years )

Compensation expenses of the year 2014 = $7,000.

ekkarill92 answered 2 years ago

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